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Israeli bank wields FBAR tax form prod on behalf of IRS

On behalf of Frost & Associates, LLC posted in Tax Evasion on Tuesday, February 12, 2013.

We've written a bit in recent posts about the Internal Revenue Services efforts to close the loop on U.S. citizens they suspect of using foreign banks to hide wealth and income from tax liability. Swiss banks and the accounts they hold have garnered much of the limelight, but banks all around the world are under scrutiny as officials in Washington, D.C., try to bring some black to the red that washes over the treasury.

The assault on these assets is part of the implementation of the Foreign Account Tax Compliance Act, or FATCA. A provision of the law requires U.S. citizens holding more than a certain amount in offshore accounts to report the money annually using a Foreign Bank and Financial Account Report (FBAR) filing as part of their tax reporting.

In some cases, the banks are starting to cooperate. Evidence of that can be seen in a recent report from Reuters. It tells about a letter that was sent by Bank Leumi, the largest commercial bank in Israel, to U.S. clients. In it, the bank encourages clients to take advantage of a period of voluntary disclosure being offered by the U.S. government. Those who do so may be able to reduce the amount they might pay in fines and penalties for their alleged tax evasion.

The bank tells its account holders that it will be happy to provide any help they need to take advantage of the program. Some legal experts suggest that there's an implication of threat in the letter; that the information about the accounts is likely to be shared with the IRS whether the FBAR filings are made or not. One tax attorney in Florida reports that Leumi has acted to freeze some accounts of U.S. clients who have failed to show they've complied with the tax laws.

The current status of the voluntary disclosure program, according to the IRS, is that it is still in place. In one of the most recent announcements, officials declared that even individuals who have merely signatory power over foreign accounts, even if they don't directly benefit from them, must file FBAR forms. They've been given until June 30, 2014, to get into compliance.

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